Oil prices declined and Asian stock markets surged to record highs on Wednesday after Donald Trump announced that negotiations with Iran were making "great progress" toward a final agreement and ordered a brief pause in US operations escorting ships through the Strait of Hormuz.
Oil and Market Movements
Brent crude fell 1.2 per cent to $108.51 a barrel, still well above its pre-war price of roughly $70 but lower than the highs of recent weeks. On Wall Street, the S&P 500 rose 0.8 per cent to a new all-time high on Tuesday, while the Nasdaq gained 1 per cent, as oil pulled back sharply after briefly crossing $115 on Monday.
Corporate Earnings Boost Wall Street
Strong corporate earnings underpinned the rally. DuPont surged 8.4 per cent after reporting better-than-expected first-quarter profits and raising its full-year forecasts, despite acknowledging some impact from logistics disruptions in the Middle East. Pinterest jumped 6.9 per cent as active monthly users rose 11 per cent to 631 million, beating sales and profit targets. AB InBev climbed 8.7 per cent after topping profit forecasts on growth for its Corona, Stella Artois and Michelob Ultra brands. "Cheers to beer," chief executive Michel Doukeris said. Palantir fell 6.9 per cent despite beating expectations, as its stock struggled on worries about increased competition. American Electric Power rose 1.8 per cent and Cummins added 2.8 per cent after both reported stronger-than-expected results.
European and Asian Markets Mixed
In Europe, the CAC 40 rose 1.1 per cent in Paris while the FTSE 100 fell 1.4 per cent in London. Hong Kong's Hang Seng fell 0.8 per cent. Many Asian markets were closed for holidays. The momentum carried into Asia on Wednesday, where MSCI's broadest index of Asia-Pacific shares outside Japan jumped 2.3 per cent to a fresh all-time high. South Korea's Kospi surged 5.1 per cent, clearing the 7,000 mark for the first time, as Samsung Electronics jumped 12 per cent and crossed a $1 trillion market valuation, overtaking Berkshire Hathaway.
AI Trade Drives Enthusiasm
The AI trade drove much of the enthusiasm. Advanced Micro Devices jumped 16.5 per cent in extended trading after forecasting second-quarter revenue above Wall Street expectations on strong demand from cloud computing companies accelerating spending on AI infrastructure. "Due to the capital expenditure we are seeing from hyperscalers in the US, the earnings growth trajectory for sectors such as semiconductors, tech hardware, industrials and materials in Asia exceeds anything I have seen in a long time," Rushil Khanna, head of equity investments for Asia at Ostrum, an affiliate of Natixis Investment Managers, told Reuters. "This capex is leading to material value creation in Asia as the provider of the picks and shovels to the AI ecosystem."
Diplomatic Backdrop and Market Caution
The diplomatic backdrop of US-Iran talks also helped markets. Mr Trump said he would briefly pause US operations escorting ships through the strait, which has been effectively closed since Iran blockaded it in late February, triggering a global energy shock. US defence secretary Pete Hegseth confirmed the ceasefire remained in place despite the US and Iran exchanging fire the previous day. "Markets embraced a sense of calm and stability overnight, with the risk of escalation in the Middle East conflict viewed as having diminished," analysts from Westpac wrote in a note. Despite the optimism, analysts cautioned that significant uncertainties remained this week. "A fragile ceasefire, a novel blockade, Friday's NFP and diminishing odds of a US-Iran peace deal are all converging this week," said Lukman Otunuga, head of market research at trading broker FXTM. "Gold may find itself on the losing end of conflict-induced inflation fears, even as uncertainty grips markets."
Commodities and Currencies
Gold rose 1.2 per cent to $4,609.59. The dollar index slipped 0.1 per cent, snapping a three-day winning streak, with the euro rising to $1.1724 and sterling to $1.3577. The Australian dollar climbed 0.6 per cent to its highest since June 2022, buoyed by improved risk appetite and underpinned by a third consecutive interest rate rise from the Reserve Bank of Australia, which cited the Middle East conflict's impact on fuel and commodity prices. The ten-year US Treasury yield held flat at 4.424 per cent.
